Dhir India Investments plc
04 December 2007
4 December 2007
Dhir India Investments plc
('Dhir India', 'DII', or the 'Company')
Maiden Interim Results
Dhir India (AIM: DHIR), the first UK quoted company established to invest in the
$50 billion Indian non-performing assets sector, announces maiden interim
results for the period from incorporation on 20 June 2007 to 30 September 2007.
The Company was admitted to AIM on 12 July 2007.
Highlights:
• Successful admission to AIM following a £25 million placing
• Five investments aggregating £5.01 million made during the period:
o £1.18 million into the assets of Jaipur Metals and Electricals
o £1.11 million into Lords Chloro Alkali
o £0.42 million into the secured debt of Synthetics & Chemicals
o £1.49 million into the assets of a hotel project in Goa
o £0.81 million into an edible oil refining unit
• Further investment of £1.13 million into a commercial real estate site
in Haryana following period end, also announced today
• Dhir India is today some 25% invested less than five months after
flotation, with substantially all of its remaining available funds approved
for follow-on investments in the above identified projects
• The Company expects to be fully invested by July 2008
Charlie Hambro, Non-Executive Chairman of Dhir India, commented:
'We are very pleased with the progress achieved in the short period since our
admission to AIM. The volume of deal flow in India's underperforming assets
sector is allowing Dhir India to be highly selective as to the projects it
engages in. The experience and on-the-ground presence of our adviser's team is
proving to be of significant benefit in making the right investments to generate
value for our shareholders from this developing sector.'
Alok Dhir, Non-Executive Director of Dhir India, added:
'Within less than five months of the placing, we have been able to secure
projects in India in which we plan to invest substantially all of the net funds
raised on admission to AIM. We believe we will be fully invested by July 2008.
The speed with which we have deployed the capital across a strong range of
investments demonstrates our confidence in the opportunities arising in the
distressed assets sector. We expect that the quality of the investments made by
the fund and their resolution will prove to be rewarding for our shareholders.'
For further information, please contact:
Shiva Consultants Evolution Securities Tavistock Communications
Alok Dhir Tom Price Simon Hudson
Shivi Agarwal Jeremy Ellis Rachel Drysdale
Chris Clarke
Tel: + 91 11 42410000 Tel: +44 (0) 20 7071 4300 Tel: + 44 (0) 207 920 3150
Chairman's Statement
I am delighted to report Dhir India's maiden interim results. On 12 July 2007,
our shares were admitted to AIM following a £25 million placing, creating the
first UK quoted company investing in the Indian non-performing assets sector.
Strategy
Dhir India was established in order to capitalise on the growing number of
non-performing assets (NPAs), which were built up primarily as result of the
transformation of the Indian economy in the 1990s from a centrally regulated to
a more free market economy. During this time, commercial lending rates were as
high as 18 to 20 per cent. per annum, whilst industrial growth rates remained
sluggish at 2 to 3 per cent. per annum. As a result, Indian industry could not
compete with international companies, which had a much lower cost of capital.
The resultant NPAs are typically over-leveraged capital structures with
insufficient liquidity and in default of their obligations to creditors. As we
have seen in our investments made to date, NPAs often have significant assets
and/or solid underlying business fundamentals, which are not being fully
utilised in spite of the fact that the rate of growth in the industrial sector
has caught up with that of the rest of the economy.
We believe that the resolution of the existing debts, and in some cases a
turnaround of the underlying business, can lead to the generation of substantial
profits in the short and medium term on exit from the investments, providing
shareholders with both income and capital growth.
Dhir India primarily considers four types of investment opportunity:
Turnaround of companies
Re-sale of assets or companies
Break-up and sale of assets
Bridge financing
The Company is advised by Shiva Consultants, its asset manager and investment
adviser, which is responsible for sourcing, appraising and managing investments.
Led by Alok Dhir, Shiva Consultants and its team has over 60 years of cumulative
experience in the Indian distressed assets market from legal, financing and bank
ing perspectives. Shiva has identified and managed the investments the Company
has made to date and spent much of the period under review sourcing additional
opportunities and completing due diligence on the pipeline of investments in
place at the time of Admission.
Review
In the period under review, the Company reported a profit attributable to equity
shareholders of £90,000 and had net assets of £23.1 million at the period end.
The Company has now made six investments comprising two turnarounds, two planned
resales of companies and two planned break ups and sales of assets. Just five
months after Admission, Dhir India has invested £6.14 million of the equity
raised and is now around 25 per cent invested. Substantially all of the
remaining available funds have been approved for follow-on investments in the
six identified projects. I am pleased to report that, in line with our stated
strategy, we are on target to be fully invested within twelve months of
Admission (July 2008).
The volume of deal flow in India's underperforming assets remains high. We have
been approached from our network of contacts with some £100 million of potential
investment opportunities and this has allowed us to be very selective and only
commit funds to those high quality investments most likely to deliver strong
returns to our shareholders. The investments made to date form a diversified
portfolio with broad exposure to a range of sectors and a mixture of short and
medium term projects.
Summary of Investments
Our first three investments were announced on 3 October, Projects Destination
India and Triton on 5 November and Project Cygnet today. They are summarised
below.
Project Turquoise
The target company was originally a manufacturing company which, due to an
inability to restructure the business and invest in plant and machinery, ceased
production in 1998. Its plant is located on a 41,000 sq m site in the centre of
Jaipur, the capital of Rajasthan. The total acquisition cost is estimated at
£6.54 million, of which DII is expected to contribute £4.91 million. The special
purpose vehicle (SPV) has already invested £1.575 million, of which DII's share
is £1.18 million. The investment is secured on the real estate assets of the
company. It is expected that the process of acquisition and resolution will take
around 12-15 months.
Project LCAL
The Company acquired 1,500,000 new equity shares in LCAL at a price of 74 pence
per share, representing 5.96% of the issued share capital. The £1.11 million
investment will help to fund significant expansion of LCAL's plant capacity and
facilitate its long-term revival and turnaround.
LCAL manufactures caustic soda based products, supplying the paper, soap, dyes,
chemicals and plastic industries. The company performed satisfactorily until
1997 when it incurred significant losses as a result of lengthy power cuts and
increases in input production costs. Since that time, a new management team has
effected the recovery of the business, with sales increasing by more than 200%.
The management are now setting in place plans for further capacity expansion and
plant improvements, which will result in increased economies of scale and
competitive advantages. This investment will enable LCAL to capitalise on the
dramatic increase in demand for caustic soda products in India.
Project Aquamarine
An SPV was created to acquire an interest in the assets of the target company
for an estimated consideration of £1.87 million of which £1.40 million would be
the investment by DII. Of this sum, £0.558 million has been invested to date,
with Dhir India contributing £0.42 million.
The company was a manufacturer of styrene butadiene rubber, nitrite rubber,
styrenated phenol and alcohol. The company suspended works in July 1999, due to
severe capital constraints and labour and power supply issues. Its 1,200 acre
plant is situated approximately 15km from Bareilly in Uttar Pradesh, a tier II
industrial city in North India.
Dhir India's investment is secured by the high value of the assets of the
company and it is anticipated that this project will take between 9 and 12
months to execute.
Project Destination India
The Company acquired an interest in the assets of a hotel project in Goa,
through an SPV, for a consideration of approximately £1.575 million, of which
DII's share is £1.49 million. Dhir India is expected to invest around £7.70
million of the total estimated project cost of £8.10 million to enable it to
take a controlling interest in the development. Goa is a popular tourist
destination and the land, with its planning consent, is an attractive site with
significant development potential. It is anticipated that this project will take
around 12 months to execute.
Project Triton
Dhir India has acquired an interest in the assets of an edible oil refining unit
in Gujarat through an SPV for a consideration of approximately £0.85 million, of
which DII's share is £0.81 million. The total cost of acquisition of this asset
is expected to be £1.08 million. The business refines and sells edible oils. Its
factory, which has a daily capacity of 250 MT per day, is built on a 21,524 sq m
site and Dhir India's investment is secured against the value of the factory,
land and building.
DII is planning to operate the business and introduce fresh management and
incentives in order to achieve strong returns and turn around the financial
performance. In this case, Dhir India would also provide working capital and
activate a third line of production, enhancing the capacity to 350 MT per day at
an additional cost of £1.16 million. On this basis, the project will take up to
36 months from investment to exit. Alternatively, if appropriate, value may be
achieved through the onward sale of the asset on a shorter time frame of 6 to 9
months.
Project Cygnet
Dhir India has committed to acquire a 51 acre prime site located in Sonepat,
Haryana. The SPV created has already invested £1.51 million, of which DII's
contribution to date is £1.13 million. This investment is secured on the assets
belonging to the target company, including existing buildings on the site. The
land has the potential to be developed as an IT Park, Special Economic Zone or a
mixed use residential and commercial scheme. The project will take around 12
months to complete.
Outlook
In spite of the effect of unfavourable economic factors on stock markets around
the world, developments in, and prospects for, the Indian economy remain
extremely exciting. The relatively low level of access to capital in the region
is resulting in an increasing number of opportunities for Dhir India to acquire
selective underperforming assets and unlock value from them to the benefit of
our shareholders.
The Company has now invested approximately £6.14 million, with further
identified investments still to be made. The Board remains optimistic for the
future and expects the strength of the Company's investment proposition to be
reflected in the progress made during the second half as we make further
investments and progress towards realising value from our shorter term
investments.
Charlie Hambro
4 December 2007
Dhir India Investments plc
Consolidated Income Statement by function of expense
For the period to 30 September 2007
Notes (Unaudited)
£'000
Bank Interest 266
Investment management fee 3 (105)
Administrative expenses (71)
---------
Operating Profit for the period 90
---------
Finance Costs 0
---------
Profit Before Taxation 90
---------
Taxation 0
---------
Profit attributable to Equity Shareholders 90
---------
Basic Earning per Ordinary Share 4 0.005p
Consolidated statement of recognised income
and expense
---------
Profit for the period 90
---------
---------
Total recognised income for the period 90
---------
Attributable to:-
---------
Equity holders of the company 90
---------
Dhir India Investments plc
Consolidated Balance Sheet
For the period to 30 September 2007
Notes (Unaudited)
£'000
Current Assets
Available for Sale - Financial Assets 5 5,029
Trade & Other Receivables 225
Cash and cash equivalents 19,189
---------
---------
Total Current Assets 24,443
---------
---------
Total Assets 24,443
---------
Capital and Reserves attributable to Equity holders of the company
Share Capital 6 1,667
Share Premium 21,347
Retained Earnings 90
---------
Total Equity 23,104
---------
Current Liabilities
Trade & other payables 1,339
---------
Total Equity & Liabilities 24,443
---------
Net Assets Value per share £1.39
Dhir India Investments plc
Statement of changes in Equity
For the period to 30 September 2007
Share Share Retained Total
Capital Premuim Earnings
£'000 £'000 £'000 £'000
Profit for the period 90 90
Issue of Share Capital 1,667 23,333 25,000
Share Issue Expenses (1,986) (1,986)
--------------------------------------------------------------------------------
Balance at 30 September 2007 1,667 21,347 90 23,104
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DHIR INDIA INVESTMENTS plc
CONSOLIDATED INTERIM CASH FLOW STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Notes (Unaudited)
£'000
Cash flows from Operating Activities
Operating Profit 90
Increase in Trade & Other Receivables (225)
Increase in Trade & Other Payables 1,339
---------
Net Cash generated from Operating Activities 1,204
---------
Cash flows from Investing Activities
Available for Sale - Financial Assets (5,029)
---------
Net Cash used in Investing Activities (5,029)
---------
Cash flows from Financing Activities
Proceeds from issue of Ordinary Shares 25,000
Share issue expenses (1,986)
---------
Net Cash flows from Financing Activities 23,014
---------
Net Increase in Cash & Cash Equivalents 19,189
---------
Cash and Cash Equivalents at end of period 19,189
---------
Notes to the Unaudited Interim Results
For the period ended 30 September 2007 (unaudited)
1. Significant accounting policies
a) Statement of compliance
These unaudited interim results have been prepared in accordance with the
Listing Rules of the Financial Services Authority. They have not been
prepared in accordance with International Accounting Standard 34 but have
been prepared under International Financial Reporting Standards ('IFRS'),
as adopted by the EU, issued by the International Accounting Standards
Board ('IASB'), interpretations issued by the International Financial
Reporting Interpretations Committee of the IASB and applicable legal and
regulatory requirements of Isle of Man Law and reflect the following
policies, which have been adopted and applied consistently.
No IFRSs have been adopted early, however it is likely that any Standards
issued (but that are not yet effective) would only require changes in
disclosure and not result in changes to the accounting policies for
recognition and measurement.
The interim results were authorised for issuance on 4 December 2007.
b) Basis of preparation
The interim results have been prepared on an historical cost convention
except for in accordance with IFRS as adopted by the EU. The interim
results are presented in Pounds Sterling ('Sterling'), rounded to the
nearest thousand Pounds.
The interim results incorporate the results from the date of incorporation, 20
June 2007 to 30 September 2007. The company was admitted to AIM on 12 July 2007.
As this is the maiden set of results for the company there are no
comparatives.
c) Consolidation
The consolidated financial statements incorporate those of Dhir India
Investments plc and all its subsidiary undertakings for the given financial
period.
Subsidiaries are entities that are directly or indirectly controlled by the
Group. Control exists where the Group has the power to govern the financial
and operating policies of the entity so as to obtain benefits from
activities.
Inter company transactions and balances between group companies are eliminated.
d) Income
Bank interest is accounted for on an accruals basis.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except as follows:
(i) expenses which are incidental to the acquisition of
an investment are included within the cost of the investment;
(ii) expenses which are incidental to the disposal of an
investment are deducted from the disposal proceeds of the investment.
f) Fixed Asset Investments
Unlisted Investments
In valuing investments, the Directors follow the principles recommended in the
International Private Equity and Venture Capital Valuation Guidelines which were
effective from January 2005. Investments are valued at Fair Value at the
reporting date. In the small minority of cases where Fair Value cannot be
reliably measured, existing book value, less any impairment, is used as the
basis of valuation.
Fair Value represents the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction. In estimating
Fair Value, the Directors use a methodology which is appropriate in light of the
nature, facts and circumstances of the investment and its materiality in the
context of the total investment portfolio. Methodologies are applied
consistently from one period to another except where a change results in a
better estimate of Fair Value. Because of the inherent uncertainties in
estimating the value of private equity investments, the Directors exercise due
caution in applying the various methodologies.
Methodologies
The principal methodologies applied in valuing unlisted investments include the
following:
• Price of recent investment
• Earnings multiple
• Net assets
• Discounted cash flows or earnings of the underlying business
• Discounted cash flows from the investment
• Industry valuation benchmarks
The 'Price of Recent Investment' method will be used for investments up until
such time as work has been performed in enhancing the value of the underlying
assets, or there are external factors which indicate this method is no longer
applicable.
g) Foreign Currency Translation
Indian Rupees ('INR') is the functional currency as India is the primary
economic environment in which the Group operates. Consequently INR is the most
appropriate measurement currency for the Group. The Group uses British Pounds
sterling ('GBP') as the presentation currency for its IFRS financial statements.
All assets and liabilities are translated at the closing rate at the balance
sheet date. Income and expense items are translated at the average rate for the
period.
h) Cash and cash equivalents
Cash in hand and in banks and short-term deposits, which are held to maturity,
are carried at cost. Cash and cash equivalents are defined as cash in hand,
demand deposits and short-term, highly liquid investments readily convertible to
known amounts of cash and subject to insignificant risk of changes in value.
For the purpose of the Cash Flow Statement, cash and cash equivalents consist of
cash in hand and deposits at banks.
2. Taxation
The Company has been granted exemption from Isle of Man taxation under the
Income Tax (Exempt Bodies) Ordinance 1989 and is charged an annual exemption fee
of (as per prospectus).
3. Investment Management
Shiva Consultants Private Limited (the 'Manager') is entitled to a management
fee of 1.8 per cent per annum of the Net Asset Value of the Group's investments
('NAV') which is payable quarterly in advance in the first year and a management
fee of 2 per cent per annum of the NAV payable quarterly in advance thereafter,
provided that any fee for any commencing or terminating period shall be the
pro-rated amount.
The NAV calculation of each financial year is based on semi-annual independent
valuations of such investments in accordance with IFRS as at the end of the
relevant financial year and at the date which is six months after the relevant
financial year end. Throughout the relevant financial year, the management fee
paid on each quarter date is based on the latest NAV calculation. The management
fee payments are then adjusted retrospectively following the next NAV
calculation.
Performance Fee
The Manager is entitled to a performance fee, calculated as follows, in respect
of net proceeds received by the relevant member of the Group in respect of an
investment:
• the Net Investment Proceeds will first be allocated to the Group, until
the Group has received an amount equal to the Investment Outlay and an
Investment IRR of 12 per cent.
• any remaining balance of the Net Investment Proceeds will then be
allocated to the Manager until the Manager has received an amount equal to
25 per cent of the return already allocated to the Group;
• any remaining balance of the Net Investment Proceeds will then be
allocated between the Group and the Manager in the ratio 80:20 up to an
Investment IRR of 25 per cent; and
• any remaining balance of the Net Investment Proceeds will then be
allocated between the Group and the Manager in the ratio 65:35.
No performance fee has been provided within the initial period.
4. Earnings per Ordinary Share
Basic
The basic earning per Ordinary Share has been calculated by dividing the
Profit for the period of £ 90,000 by the average number of Ordinary Shares
of 16,666,667 in issue throughout the period.
Fully Diluted
The fully diluted and basic earnings per Ordinary Shares are the same, as
based on the exercise price of the Warrants, the Warrants are not dilutive.
5. Available for Sale - Financial Assets
Period ended
30 September 200
£'000
Additions 5,029
Movement in unrealised appreciation -
--------------------------------------------------------------------------------
End of period 5,029
--------------------------------------------------------------------------------
There were no disposals or impairment provisions on available for sale Financial
Assets. All available for Sale Assets have been valued based on the 'Price of
Recent Investment' method, cost.
Available for Sale Financial Assets include the following:-
£'000
Unlisted securities Nil
Equity Securities 1,116
Debt securities charged on Assets 3,913
Sub Total 5,029
Available for Sale - Financials Assets are denominated in Indian Rupees.
The maximum exposure to credit risk at the reporting date is the Fair Value of
the Debt Securities classified as Available for Sale.
The company has invested in five separate Available for Sale - Financial Assets
investments during the period.
Since the period end a further Investment amounting to £1,130,000 has been made.
6. Share Capital
Authorised 30 September 2007
(unaudited)
£'000
100,000,000 Ordinary Shares of 10p 10,000
Allotted, called up and fully paid issued during the
period
16,666,667 Ordinary Shares of 10p 1,667
The company issued 16,666,665 Ordinary Shares of 10p for cash at a placing price
of 150p per share on 12 July 2007.
7. Warrants
At the placing on 12 July 2007, for each Ordinary Share received the subscriber
also received one Warrant for every five Ordinary Shares.
Subscription Period
Allotted Exercise Price
Warrants 3,333,333 £1.875 12 July 2008 - 12 July 2009
8. Net asset value per Ordinary Share
Basic
The net asset value per Ordinary Share is based on the net assets
attributable to equity shareholders of £ 23,104,000 and on 16,666,667
Ordinary Shares in issue at the end of the period.
Fully Diluted
Based on the exercise price of 187.5p the Warrants are not dilutive to the
net asset value per ordinary share.
This information is provided by RNS
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